It will increase by 1.25 percent for one year from April 2022, before the 1.25 percent Health and Social Care levy is introduced, which pensioners will also need to pay. Once the new National Insurance tax increase comes into effect this year, the average worker will pay an extra £255 annually in taxes.
Put into perspective, this means that an employee earning £20,000 a year will have to pay an extra £130.
Higher earners on a £50,000 salary would pay an additional £505.
Dividend tax rates, payments made by a corporation to its shareholders after corporation tax, are also set to rise by the same amount from April in a bid to alleviate the state-run NHS’s backlog.
READ MORE: Pension warning as Britons could be clobbered by ‘scary’ tax code
However, individuals earning under £9,564 a year, equivalent to £797 a month, won’t be subject to the new levy.
Millions of UK workers will be affected as the new Build Back Better government plan will see the new Health and Social Care levy paid on all earned income, including a charge for those working beyond state pension age from April 2023.
Such developments come in an effort by the government to raise £12billion a year, or £36billion over the next three years, in order to fund social costs.
Devolved governments in Scotland, Wales and Northern Ireland will receive an extra £2.2billion per year as part of the levy.
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Prime Minister Boris Johnson stated that while the tax hike was not a part of the Conservatives’ original 2019 manifesto pledge, the new measures are necessary.
He said they are needed to ease the pressure that the Covid-19 pandemic has undoubtedly placed on the NHS.
What’s more, anyone with assets under £20,000 will have their care costs fully covered by the government from October 2023.
Those with assets between £20,000 and £100,000 will be expected to contribute to their costs but will also receive state support.
Concerns have been raised about the impact on lower-paid employees.
Workers currently pay 12 percent National Insurance on earnings between £9,564 and £50,268 but anything earned above this amount warrants a meagre two percent tax rate.
This means that as income rises above £50,000, National Insurance becomes a smaller proportion of the wage packet.
The Leader of the Commons, Jacob Rees-Mogg yesterday urged the Prime Minister to shelve the National Insurance hike.
This is amid rising inflation and energy bills that are continuing to contribute to the rising costs of living in the UK.
The Bank of England has stated that it expects annual price rises to peak above four percent and stay at the level into the second quarter of 2022.
The annual rate of inflation rose from two percent in July 2021 to 3.2 percent in August that same year (its highest level since 2012), and UK prices increased 2.7 percent during the last six months of 2021 alone as a result of this.
Meanwhile in the US, consumer prices increased by 5.4 percent in September 2021, hitting a 30-year high.
Fellow Cabinet Minister, Transport Secretary Grant Shapps, has countered the criticism. Mr Shapps said Mr Johnson’s ministers have a collective responsibility to support Government decisions, especially given the growing costs of social care in the UK.
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